The Central Bank of Nigeria (CBN) has intensified efforts to draw foreign capital by offering elevated yields on Open Market Operation (OMO) bills, spurring increased participation from foreign portfolio investors and domestic banks. The higher rates have fueled a surge in “hot money” inflows, stabilizing the naira and enhancing US dollar liquidity in Nigeria’s foreign exchange market.
In its latest OMO auction, the CBN rolled out attractive rates on short-term securities to sustain foreign investment. Notably, the bank offered a 25.99% per annum rate on 124-day OMO bills, surpassing investor expectations and signaling a strategy to retain offshore funds for longer periods, according to a report by Coronation Merchant Bank.
The auction saw the CBN offer N600 billion across 89-day and 124-day bills. Demand heavily favored the 124-day bills, with subscriptions reaching N1.01 trillion against the N300 billion offered, resulting in a bid-to-offer ratio of 3.38x. The CBN allocated N894.94 billion at a stop rate of 25.99%, significantly exceeding the initial offer. Conversely, the 89-day bills saw minimal interest, with only N2.25 billion subscribed against N300 billion offered, and allotments matched at a 25.50% rate.
Analysts at Coronation Merchant Bank noted that the strong preference for 124-day bills reflects investors’ appetite for higher-yielding, medium-term securities amid tightening liquidity conditions. In the secondary market, activity in the OMO segment remained subdued, with marginal interest in bills maturing on December 16, February 17, and April 7/14. The average yield in the OMO market dipped slightly by 5 basis points to 24.5%.
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